2 Mexican Banks Reportedly OK Settlement in Drug Money Case

With their trial just days away, two of Mexico’s biggest banks have agreed to plead guilty to laundering millions of dollars for the Cali and Juarez drug cartels, sources close to the case said Monday.

Bancomer will pay $9.9 million in fines and penalties, while Banca Serfin will pay $4.7 million as part of their separate deals with federal prosecutors in Los Angeles.

The sources said prosecutors will drop all criminal charges against a third Mexican financial institution, Banca Confia, in a civil settlement of the money laundering case.

Confia, which sold most of its assets to Citibank after it was indicted, has in turn agreed not to fight the government’s earlier seizure of $12.1 million from its U.S. holdings.

The sources, who provided an outline of the plea agreements, said a few sticking points remain, but are expected to be resolved as early as today. A hearing has been scheduled for this afternoon before U.S. District Judge Lourdes Baird to enter the guilty pleas.

All three banks were indicted last May along with more than 100 people, mostly Mexicans, in Operation Casablanca, the Customs Service’s 2 1/2-year probe of international drug money laundering.

Twenty-two bankers from a dozen Mexican and two Venezuelan financial institutions were implicated.

When it became public, the probe set off a diplomatic firestorm as Mexican officials complained of being kept in the dark about the cross-border operation. Customs agents said they deliberately withheld information because they feared a leak by corrupt Mexican law officers.

In addition to fines arising from their criminal pleas, Bancomer and Banca Serfin face hearings before the Federal Reserve Board to decide whether they should be barred from operating in the United States.

Under a 1992 law, any foreign bank convicted of money laundering is subject to a mandatory license revocation hearing before the Fed.

Loss of their offices in the United States would deny the banks access to one of the world’s most important financial centers and to international sources of capital.

The issue reportedly figured in the plea bargaining talks between defense lawyers and government prosecutors.

To allay the banks’ concerns, sources said, prosecutors agreed to write a letter to the Fed, saying the banks were cooperating with investigators.

Bancomer, with close to $30 billion in assets, is the second-largest bank in Mexico and provides a broad range of commercial and retail banking services throughout the country. It maintains offices in Los Angeles and New York and is a partner with the U.S. Postal Service in Dinero Seguro, a program that enables people in the United States to transfer money electronically to relatives in Mexico from post offices here.

Banca Serfin, third-largest with $16.7 billion in assets, also offers a full range of retail and commercial banking services. It maintains offices in New York.

After the indictments were issued, federal authorities instituted asset forfeiture actions against the U.S. assets of all 14 Mexican and Venezuelan banks whose employees were accused of participating in the money laundering network.

More than $68 million was confiscated, including $16 million from Bancomer, $12.1 million from Banca Confia and $9.5 million from Banca Serfin.

Justice Department attorneys are also in the process of preparing civil suits against the banks seeking civil damages for the alleged money laundering activities.

Despite the pending plea agreements with the banks, the trial is expected to start Thursday against six Mexican bankers and businessmen, the remaining defendants in this case.

Eleven defendants previously entered guilty pleas; 20 more are fugitives.